It’s been a tough year for national firm Hill Dickinson. With both profit per lawyer and profit per equity partner taking a tumble of 15% – each at £33,000 and £264,000 respectively – and recent partner and staff redundancies matching others struggling in a turbulent market, the 200-year old firm has confirmed that it has issued a £2.8m cash call to partners to boost the balance sheet due to what managing partner Peter Jackson says was down to a year of heavy investment. Continue reading “Investment costs: Hill Dickinson partners vote through £2.8m cash call”
Does abuse of tax rules for partnership require a major clampdown by the taxman? That’s the £300m question and the reason that the majority of large law firm partnerships in the UK are now facing an overhaul of the tax treatment of partners and retained earnings.
Tax specialists and legal finance directors are currently sizing up proposals from HM Revenue & Customs (HMRC) to change the treatment of members and retained earnings in limited liability partnerships (LLPs). Continue reading “Do you need to think about tougher tax rules for your partnership? Er, probably”
Legacy Herbert Smith has become the latest UK firm to ask partners to bolster its capital levels, issuing a multi-million pound cash call in preparation for financial integration with Australia’s Freehills.
The call – thought to be worth up to around £20m – was issued in a memo sent weeks ago to all 170 equity partners. It is thought that the equity partners have been asked to contribute £2000 per equity point. Herbert Smith’s lockstep ladder runs from 43 to 100, meaning those at the top of equity, around 65, are liable to pay around £200,000 each.
When former Dewey & LeBoeuf partners blamed Citibank for not telling them about the dire state of the firm’s finances, they got short shrift. In today’s legal market, there’s no excuse for not scrutinising the balance sheet. Here’s LB’s definitive guide to all you need to know
When law firms fail, the fallout can be spectacular. Take the case of DLA Piper’s Berge Setrakian, a one-time corporate partner in the New York office of Dewey & LeBoeuf, who now finds himself on the hook for $3.5m that he has agreed to pay in return for being released from liabilities in the largest law firm failure in US history. His former colleague, white-collar defence attorney Ralph Ferrara (now at Proskauer Rose), will stump up $3.7m; M&A supremo Morton Pierce (now at White & Case) is set to pay $1.02m. The lesson: when things go wrong, partners get hit where it hurts.
To avoid any costly surprises, it pays to know your firm’s balance sheet inside out. But many don’t.
News that Ashurst is adopting a capital contribution system for partners this year finally brings the City International firm in line with the rest of its major rivals in the City.
As part of the reorganisation, each Ashurst equity partner will be asked to pay in a one-off capital contribution based on the number of equity points they hold. Currently, the firm does not ask partners to pay in capital, but retains a percentage of partner profits each year that is then distributed to partners when they leave or retire. The move is a bid to align capital contributions from lateral hires and homegrown talent, and bring the firm in line with its Australian merger partner Blake Dawson.
There’s no doubt that there was a hardening of the professional indemnity (PI) insurance market in the past year for firms outside the LB100. The advantages of the soft market have truly come to an end. Many smaller firms have been hit hard by the hikes in premiums, due primarily to the rising number of claims within conveyancing, coupled with an increased chance of the firms failing, and the impact of fraudulent activity in the market.
The reality for a number of firms is that up until now their risk teams have been wading through treacle to get their firms in shape. Now that the concept of effective risk management is universally recognised, the hard work begins for some: getting the appropriate level of support internally. To our survey question ‘What are the main barriers to implementing a risk management culture at your firm?’, the response ‘getting proper “buy-in” from fee-earners’ came up time and again. Continue reading “Finding a voice”
This section looks at the key risks identified by the top 150 firms in the UK in our third risk management survey. While last year client bankruptcy, credit problems and other recession-related fears dominated risk managers’ agendas, this year some of those fears may have abated.
Of the potential risks identified by risk managers, the threat of clients being acquired or declared bankrupt has fallen sharply, scoring on average 2.6 out of five, compared to 3.6 last year (see ‘Legal risk profile’ table, opposite).